Now is the perfect time to review your wills and consider any inheritance liability you may have. Read through this guide to inheritance tax planning to understand more about allocating your assets effectively.
With a fall in the value of some assets due to the Coronavirus pandemic paired with HMRC’s plans to overhaul the inheritance tax system, it is a great opportunity to get your affairs in check.
Planning for our Loved Ones’ Futures
We all want to ensure that our loved ones are provided for in the best way possible for years to come.
As a result of lockdown and a global pandemic, housing values and savings rates are set to decrease, with the threat of a recession incoming. Taking a look at the value of your estate and deciding how your loved ones can get the most from what is available is key at this time.
Gifts between spouses and civil partners either during lifetime, or on death do not attract inheritance tax, but when the estate passes down to the next generation, the estate may then be assessed to inheritance tax.
The sooner we act to protect our assets, the more we can relax and enjoy life once a sense of normality resumes, and we can see our families and friends properly again.
Estate Planning with Solicitors
Putting in the time to plan now with an experienced solicitor provides many benefits, including finding the best way to ensure your estate passes to the people and causes you wish, in the most efficient manner, and with asset preservation in mind.
The Value of Inheritance Tax Planning
There are a variety of ways in which we can make the most of inheritance tax planning. We will explain some of these options below.
Remember that if you have any queries about tax planning methods not mentioned here, our estate planning solicitors will be able to advise you on the best options available to you.
Make the most of exceptions and allowances
We each have an annual tax gift allowance of £3,000. This means you can give away up to £3,000 worth of gifts each tax year without any inheritance tax consequences.
There is also an exemption which allows an individual to make continuing and regular gifts from income, although advice should be taken to ensure it is done correctly, if you are planning to use this exemption.
HMRC outlines specifics considerations for your inheritance tax planning on their website.
Make use of trusts
Often, when people become grandparents, they will set up a trust for their grandchild or grandchildren.
In addition to providing relief in terms of inheritance tax, a trust can be used to save up money for the grandchildren’s school or university fees, or go towards their first house purchase.
Generally, the maximum you can put into a trust within a seven-year period is £325,000. Anything beyond this will be taxed at 20%.
Create a tax-efficient will
A will is probably the most important document you will make in your life, as it dictates what happens to your assets after you die. Most importantly, a watertight will ensures that all of your assets are allocated in the way that you wish.
Families change over time. Life milestones come and go. Our list of people to leave something for can grow or shrink for endless reasons.
Ensuring that your will is up to date in line with your current situation, and is valid with the correct legal documentation and signatures, are the two key factors.
As well as our nearest and dearest, we can also gift to charity in a will. For efficient inheritance tax planning purposes, it may be worthwhile noting, that should 10% or more of your estate be left as a gift to charity, your executors may be entitled to a slightly reduced inheritance tax rate.
Consider a Lasting Power of Attorney
You may also wish to consider Lasting Powers of Attorney (“LPAs”):
- By having in place an LPA for Financial Decisions, you would be able to appoint persons of your choice to be your attorneys. This gives them the power to deal with matters such as operating your bank accounts, dealing with your investments and benefits, or the sale of your house etc.
- By having in place an LPA for Health and Care Decisions, in the event that you had lost capacity, your attorneys could make decisions about any care you received (in the event that care was required), where and how you received that care, and what your day-to-day care or treatment involved.
Speak with our Estate Planning Solicitors
We understand that having to consider all of these factors, and more, can feel overwhelming at first. Our team of friendly, experienced solicitors do this kind of work day-in, day-out. You can rest assured that all bases will be covered in creating a complete plan to that you can carry on living worry-free about inheritance.
Our wills, trusts & probate team are rated 4.8 stars out of 5 on Review Solicitors. If you need further peace of mind that you are in good hands, please look through the feedback.
If you have any queried at all about inheritance tax planning, please do not hesitate to contact us. You can call us on 0161 969 3131 or leave your contact details and one of the team will be in touch.